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| How We Use ETFs |
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| What Are ETFs? |
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| Exchange Traded Funds (ETFs) are investment vehicles that trade like a stock on an exchange. Many ETFs hold a collection of securities designed to track the performance of a financial market index (or basket of stocks) with a specific investment objective. They can track a broad market segment, such as large capitalization U.S. stocks, or specific areas like a particular sector or country. The securities an ETF may track can include stocks, bonds, commodities, or even currencies. |
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| Why ETFs? |
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| Investing through ETFs may have several benefits over using mutual funds, hedge funds or individual securities. |
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Lower taxes and fees than many mutual funds and hedge funds reduce drain on principal and enhance compounding |
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ETFs are highly liquid and transparent |
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They provide access to broad stock and bond indexes, countries, sectors, commodities and may even be used to “short” the market
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Easily provide the ability to track an entire market segment |
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Index investing minimizes style drift |
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Eliminates the risk of active portfolio manager turnover hurting performance |
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Diversifies out stock- or company-specific risk. |
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| But perhaps the most compelling reason to invest through ETFs is that the majority of active portfolio managers do not outperform their benchmark index after fees and expenses: |
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| How Does MMA Select ETFs? |
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| The exponential growth in the number of ETFs in the market place has heightened the importance of industry insight and analysis to help differentiate among products. Our goal is to carefully select the ETFs in each asset category which provide the highest probability of meeting our investment objectives. |
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| Our selection process includes an analysis of: |
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Structure and turnover of the underlying indexes |
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Correlation characteristics and volatility of indexes |
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Historical performance of the ETF in different investment cycles (scenario-based testing) |
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